The Goldilocks economy of the United States in comparison with Europe: an analysis with EUROMON

The economic development in the United States has been very successful over the past decade, with high economic growth being accompanied by relatively low inflation. This article explores this development, comparing the economy of the United States with that of the EMU. In addition, it considers the contrasts between the large and the small EMU countries as regards the correlation between inflation and unemployment. Analyses based on simulations using the Bank's multicountry model EUROMON show how the economy in the United States would have developed in circumstances more typical of a 'standard economy', to which the traditional Phillips curve applies. Subsequently, also drawing on simulations, this article discusses several aspects of the new economy in the United States and the EMU, i.e. spending impulses in combination with more scope for market forces, and in combination with technological progress, for example, in the field of computers and information.